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JOHANNESBURG – An alliance of non-governmental organizations has called on the government to increase the health promotion fee to 20 percent to help South Africa pay for Covid-19 vaccines.
The Healthy Living Alliance (Heala) said yesterday that increasing the levy from its current 11 percent could net billions of rand in the short term for Covid-19 and could also reduce non-communicable diseases over time.
Heala chief Lawrence Mbalati said an increase in the levy would encourage the tax’s positive impact through increased revenue and savings on healthcare costs.
The levy, introduced in April 2018, is a sugary beverage tax of R2.21 for every gram of sugar in a drink that contains more than 4 g of sugar per 100 ml.
A 2016 model study found that a 20 percent government tax could bring significant health cost savings by averting an estimated 72,000 premature deaths and health costs in excess of R 5 billion over 20 years.
“The 11 percent health promotion tax has already brought in R 5.8 billion for the government,” said Mbalati.
“Increasing the health promotion tax to 20 percent could help South Africa pay for Covid-19 vaccines and thousands of additional nurses, doctors, and healthcare workers.”
Finance Minister Tito Mboweni will explain next week how the Treasury will fund the South African Covid-19 vaccination program.
The government estimates the Covid-19 vaccination program could cost at least R 20 billion as more than 40 million citizens need to be vaccinated to reach a herd community.
However, tax analysts have ruled out the possibility of significant tax increases given the expected budget overrun.
South Africa has asked the Serum Institute of India to withdraw the 1 million doses of Covid-19 vaccine, which cost R78 million to procure earlier this month.
The country has since turned to the use of the Johnson & Johnson vaccine, which reportedly received 80,000 doses yesterday.
Former head of the National Treasury Department’s budgetary office, Michael Sachs, said the health promotion tax was a tightly focused tax that would struggle to meet the goals set by Heala.
The associate professor at Wits University said the VAT and fuel levy are the best examples of broad-based taxes that are also reliable sources of income.
“I think from a public finance perspective, the first lesson you learn is that consumption taxes should be as broadly based as possible, and that is why sales tax is preferred by tax officials,” said Sachs.
“However, if you want to grow sales at the lowest cost, you should focus on products that are very inelastic. Things that collect the tax and people’s behavior don’t change in response to the tax.”
Meanwhile, the South African Breweries (SAB) appealed to Mboweni not to raise excise taxes in the upcoming budget speech after the alcohol industry suffered losses from multiple lockdowns.
SAB’s Director of Regulatory and Public Order Hellen Ndlovu said the beer industry had deposited R 15.5 billion as excise tax in the treasury in 2019 before the pandemic.
“In the short term, we are not asking for any excise duty increases,” said Ndlovu.
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